NEW YORK (CNN/Money) - The Dow Jones industrial average edged lower Monday, scaling back ahead of a Federal Reserve interest rate decision due out Tuesday and a vote on the proposed $22 billion Hewlett-Packard/Compaq Computer merger.

The Dow Jones industrial average fell 29.48 to 10,577.75. The Nasdaq composite added 8.76 to 1,877.06. The Standard & Poor's 500 index fell 0.61 to 1,165.55.

"It was a respectable day. But after the (Fed) decision tomorrow, I think we can do better," Larry Wachtel, market analyst at Prudential Financial told CNNfn's Street Sweep. "I think the Street is braced for a no-rate-cut, no-rate-hike move from the Fed."

On Tuesday, the Federal Reserve Board issues its latest decision on interest rates. The central bank is widely expected to leave interest rates unchanged, but may perhaps set the stage for future increases as recent signs have shown the economy stabilizing.

"Everyone is waiting to see if the Fed does anything, and if it doesn't, what it says about the economy over the rest of the year," Alan Kral, portfolio manager at Trevor Stewart Burton & Jacobsen, told CNNfn's Money Gang.

Tuesday and Wednesday also bring the long-anticipated Hewlett-Packard (HWP: up $0.20 to $19.25, Research, Estimates) and Compaq Computer (CPQ: up $0.03 to $10.36, Research, Estimates) shareholders' vote on the companies' proposed $22 billion merger. After weeks of campaigning by both sides, the vote is considered too close to call.

European markets closed higher, as did most Asian markets. The dollar was a little weaker against the euro and was solidly stronger against the yen.

Treasurys were slightly higher, pushing the 10-year note yield down to 5.30 percent by the close. Light crude oil futures rose 50 cents to $25.44 a barrel in New York.

Market breadth was narrowly positive. On the New York Stock Exchange, advancers beat decliners 9-to-7 as 1.14 billion shares changed hands. On the Nasdaq, winners topped losers 5-to-4 as 1.52 billion shares traded.

Negative market breadth, more than any stock specific story, pulled down the Dow.

Aerospace issues were weak, notably United Technologies (UTX: down $0.65 to $73.70, Research, Estimates) after a Reuters report said British developer Smiths Industries may make a rival bid for component maker TRW (TRW: up $0.53 to $51.37, Research, Estimates). Boeing (BA: down $0.35 to $47.63, Research, Estimates) stock lost ground, but Honeywell International (HON: up $0.07 to $40.07, Research, Estimates), which also is in the TRW derby, was little changed.

Bear Stearns downgraded construction equipment maker and Dow component Caterpillar (CAT: down $0.67 to $59.12, Research, Estimates) to "attractive" from "buy." Merck (MRK: down $0.96 to $58.79, Research, Estimates) also hurt the Dow.

Gains in networking and chips were tempered by weakness in telecommunications, keeping the Nasdaq in a tight range, but still keeping the index in stronger territory than the overall market.

J.P. Morgan and Credit Suisse First Boston reduced 2002 and 2003 forecasts on fiber-optic equipment maker Nortel Networks (NT: down $0.40 to $4.66, Research, Estimates), and 2002 forecasts on network designer Ciena (CIEN: down $0.06 to $8.89, Research, Estimates) and equipment maker Tellabs (TLAB: down $0.29 to $10.84, Research, Estimates), within broader negative notes on the telecommunications sector.

Prudential said that the current quarter is weak for enterprise hardware names including Network Appliance (NTAP: down $0.37 to $19.81, Research, Estimates), saying the company has limited upside potential.

In the computer security industry, Network Associates (NET: down $0.26 to $27.35, Research, Estimates) said it would buy the shares that it does not already own of McAfee.com (MCAF: up $3.91 to $19.45, Research, Estimates), an antivirus software maker, for about $227 million.

Lehman Brothers reiterated its "strong buy" rating on Cisco Systems (CSCO: down $0.02 to $16.52, Research, Estimates), saying that it may be near completion of a strategic partnership with Verizon Communications (VZ: down $0.08 to $47.62, Research, Estimates), similar to the one it formed with Sprint (FON: up $0.30 to $15.87, Research, Estimates) in December.

Brown Brothers Harriman issued a positive note on the chip equipment sector, highlighting Applied Materials (AMAT: up $1.10 to $51.82, Research, Estimates).

Robertson Stephens reiterated its "buy" rating and $35 price target on Dell Computer (DELL: up $0.67 to $26.39, Research, Estimates), saying recent checks show the computer hardware maker's first-quarter should meet estimates and that its second-quarter revenue should show growth from the same period one year earlier.

Shares of Earthlink (ELNK: up $0.66 to $10.88, Research, Estimates) rose on a positive story in Barron's speculating that the online search engine is in a good position to take advantage of a move into broadband, including a recent agreement with AT&T Broadband.

Conseco (CNC: down $0.65 to $3.40, Research, Estimates) was among the New York Stock Exchange's biggest losers on a percentage basis after the troubled insurer offered a debt exchange to extend its bond maturities, a move that implies the company may not have sufficient resources to raise cash and pay back debt.

Looking at the overall market, Salomon Smith Barney said it is raising its Standard & Poor's 500 index earnings-per-share forecasts for 2002 and 2003, saying it now expects a 7.5 percent growth rate in 2002 and a 13.3 percent growth rate in 2003.